Friday, March 10, 2017

I'm not going to lie, the title alone got me a little steamed without even reading the first sentence. I really should've seen this coming, but I honestly wasn't thinking about any of the abstract ways taxes can be cut. With nearly half of Trumpcare's $600 billion in tax cuts solely benefiting the wealthy elite, the bottom 90% of Americans will see a whopping $0 in annual cuts. (see chart below)

Adam Smith revealed his book The Wealth of Nations to the general public in 1776 & in it he absolutely nailed it when he said,

"What improves the circumstances of the greater part can never be
regarded as an inconvenience to the whole. No society can surely be
flourishing and happy, of which the far greater part of the members are
poor and miserable."

Smith was a stark opponent of wealth inequality & felt as if the wealthiest citizens should pay a larger portion of taxes. Not only that, but he also said they should honestly feel compelled to give even more than what they're obligated to. There's at least one group in the United States who call themselves The Responsible Wealth Project who apparently subscribe to the same ideology. I've always thought it was silly for people to act like lower corporate taxes create more jobs. It's not like they pay a single dime of that tax they aren't willing to pay anyway. Individual tax payers always somehow end up paying for just about all corporate taxes no matter what. It's pretty easy for businesses to either raise the price of goods or lower the average wage of their employees in order to compensate for the loss. A corporation's main concern lies solely in generating profit for their shareholders so if a higher corporate tax rate suddenly starts cutting into their bottom-line, they'll immediately pass it off to both the unwitting consumers & their employees.

The provisions found within the AHCA are essentially extensions of the already more than generous income tax cuts. They will supplement President Trump's current proposed tax plan, in which we will see the wealthiest 20% of Americans receiving a $16,660 tax cut & the top 1% walking away with an extra $214,000 (Forbes). Cuts for the wealthy completely dismantles the whole Obamacare platform. I realize this was essentially the main goal of the GOP since the very second the Affordable Care Act went live, but this will almost undoubtedly result in the collapse the entire United States healthcare system altogether. That especially applies if congress doesn't somehow come up with a stunningly brilliant plan to offset the number of negative impacts these cuts will have on the system. The wealthiest people were taxed at a higher percentage in order to make rates more affordable for lower income individuals. In the same fashion, the individual mandate was put in place so that the number of younger, healthier people in the system would offset the number of sick & elderly. Repealing just the individual mandate alone would likely seem to manage,
however, Trump is in favor of continuing to cover pre-existing
conditions while also striving to keep health care affordable. With that being the case, repealing either the tax cuts or the mandate is potentially disastrous. So naturally, congress decides they'd like to axe both at the same time.

Standard & Poor's Global just released their assessment of exactly how the American Health Care Act is expected to affect the many different facets of the healthcare system & I regret to inform you that the darkest days appear to be squarely ahead of us. According to S & P, roughly 6 million to 10 million Americans are expected to lose their health insurance as soon as the AHCA goes into effect. The Commonwealth Fund just recently released a study predicting closer to 20.2 million Americans. Around 4 million to 6 million of that total number stand to lose their Medicaid coverage. Ironically enough, a lot of those white males who voted for Trump are about to receive a not-so-much thank you gift for their allegiance once they no longer have any form of health care to depend on.

Speaker of the House, Paul Ryan, has insisted that implementing the AHCA means more choices for consumers & a more competitive overall market that will allow people to buy the type of plan they need & can afford. This assertion has been met with some pretty staunch opposition, with many analysts suggesting that those who stand to benefit the most in this situation are the private insurance companies. Here's a link to the break down of Trump's proposed plan so you can be the judge yourself. One of the glaring bright spots I found tucked inside the plan involves removing barriers within the pharmaceutical industry. More specifically, this would make it legal for consumers to import drugs from other countries as long as they're deemed safe & reliable. If he is indeed successful at removing any of the drug industry's barriers, then you can bet your sweet ass I'll be one of the very first people to applaud that accomplishment.

The first couple of months under this administration have been quite the shit show. Just a quick rundown for those out of the loop, it has included...

Hasty as well as occasionally pointless executive orders.

Globally embarrassing Twitter rants.

At least one failed attempt at circumventing the religious freedom clause of The Constitution - despite conflicting intelligence reports directly from Homeland Security regarding the supposed risk of allowing in immigrants from 7 Muslim-majority countries,

The deportation of honorably discharged immigrant veterans. (Obama is also guilty)

I guess whenever you appoint the wealthiest cabinet ever in United States history with 2 former top bank executives as the double slap-in-the-face cherries on top of a giant "fuck you" sundae, you're going to at least try to deregulate the exact same industry that's already proven it can't be trusted to make responsible choices when restrictions are lifted. Numerous appointees have openly campaigned to deregulate and/or abolish the very same government agency they've just been given control over, which is only great if you happen to be the type of person who doesn't enjoy things like clean drinking water, breathable air, a better public education system or a stable economy.

Who's got 2 tiny thumbs & 3rd grade vocabulary?

Everything Trump has done up until this point has been textbook supply-side economics. Luckily, we're fortunate enough to be able to analyze a number of real world examples relating to how that particular economic strategy plays out. Supply-side economics is the theory that claims tax cuts increase economic growth. Former CIO of Goldman-Sachs & current Secretary of the Treasury, Steven Mnuchin, enthusiastically endorses this sentiment. While tax cuts almost certainly lead to an fairly immediate economic growth, the national debt will continue to steadily rise unless there's also a reduction in government spending. And no, Donald...it doesn't count as a spending reduction when you totally gut future Medicaid funding or any other social safety net program that adds monetary value to a citizen's income. You're basically just taxing the citizens who benefit from them the most & also paving the way for future government expenditures. I'm sure most Americans will be way too elated with the fact that they now pay lower income taxes to even notice any of the extra money they're having to spend throughout the year.

Economic growth due to tax cuts does increase consumer spending & raise the country's GDP. While this may initially seem like the best possible outcome to hope for, it can actually end up stimulating the economy far too much far too quickly. The economic boom will result in The Federal Reserve dumping more money into circulation in order to fuel the newly increased purchasing power harnessed by the consumer. If the market supply can't keep up with the consumer demand, then the price of goods will increase in order to lower the overall demand. This is what causes inflation & even though product demand & interest rates always eventually sink back down to lower levels, the price of goods never seems to decrease with them. This is reason why we consistently see tiny, incremental drops in consumer purchasing power over the long haul. There's so much going on in such a relatively short span of time & most people are so fixated on how well the economy is doing that hardly anyone ever notices. Shortly after inflation kicks in, The Fed will then decide to raise loan interest rates in an effort to keep the number at a minimum & also curb demand.

The United States is currently projected to be $20.1 trillion in debt by the end of 2017. Our GDP is also predicted to bring in approximately $19,284.99 billion during the same fiscal year. Generally, whenever the debt-to-GDP ratio is 90% or above, it's considered to be a tax increase on future generations since they're the ones who are ultimately going to be stuck paying the bill. We've just continued piling it on them for nearly a decade. I know that Obama pretty much cut the deficit in half from that absurd amount G.W. left him with, but half of $1 trillion is still way too much money. Even if Trump actually does double our long-term GDP growth like he claims he will, so what? It still ends up having a pretty insignificant effect on the $441 billion budget deficit & it certainly doesn't even begin to scratch the surface of the national debt. All of this increased spending & lower taxes is doing nothing but pissing directly into the wind. Tax cuts for lower income families translate into increased spending & cuts to higher income families, which there's more of, boosts the stock market/banks, but never retail. In any case, our government's record of reckless spending coupled with many successive years of tax breaks under Clinton & G.W. Bush along with an economic recession have forced us into a epicly giant hole that we'll still likely be trying to climb out of well into the 2030s.

Prediction:Trump's charisma & cocky attitude are going to continue giving consumers the confidence to increase spending & the DJIA will continue rising to all-time record highs. I don't know how long it will last, but eventually the prolonged period of progress will grind to a screeching halt due to an asset bubble that's more than likely going to be created by a mixture of over-inflated stock prices & low Fed rates. If there's one thing I know a quickly soaring economy is normally good for it's spazzing out into a good ole boom-bust cycle.

**FACT** extending unemployment benefits is statistically the best known method to stimulate the economy.
- I seriously never would've even guessed that. Just happened to stumble across the article.